Global debt now exceeds $100 trillion, according to the Bank of International Settlements. Over the past five years, debt has increased by about $30 trillion. What’s more, governments have been the largest issuers.

Low interest rates have attracted governments to the appeal of using debt to fund public projects today. As the saying goes, there’s no such thing as a free lunch. At some point this debt is going to become due. At best all these governments have done is shifted expenditure forward by taking from future generations and giving to the present ones.

The magnitude of the indebtedness is what is striking. The $30 trillion of new debt issued over the past five years represents the full output of the American economy for two years. Even ignoring interest payments (which even at low interest rates are fairly hefty on $30 trillion of principal), this is a phenomenal obligation to have to pay back.

. . . .

Over the last five years the press has been full of discussions of austerity. Allegedly, governments have scrimped and saved to get by. Now we find out that we are collectively $30 trillion more in the hole compared to where we were when the recession began? If this is austerity, I’d hate to see the alternative.

(H/t Tom Woods on the Peter Schiff show.)

The gloom and doom crowd will note that a global debt of $100 trillion is $14,000 for every man, woman, and child in the world — including countless millions of Africans who live on less than two bucks a day, for whom $14,000 represents the sum they could live on for 30 years. The gloom and doom crowd thinks such sums cannot be repaid, and never will be repaid.

86 Responses to “World Debt, Now $100 Trillion, Increased $30 Trillion in the Last FIve Years”

I stayed for a couple of nights at a bed & breakfast in Harare. It had a decent library, and there must have been at least five or six hundred trillion dollars worth of bookmarks tucked here and there into the pages of the collection.

Global debt now exceeds $100 trillion, according to the Bank of International Settlements. Over the past five years, debt has increased by about $30 trillion. What’s more, governments have been the largest issuers.

I don’t mean to nitpick with the end source, the Bank for International Settlements, but these are the same folk who lead the fight against the paper price of gold, especially the ETFs, up until recent weeks while foreign governments were taking delivery of physical metal.

Total financial and public debt in Great Britain, the largest single financial market, is 1000% of GDP.

The total notional value of CDSs written by world hedges is > $400 Trillion.

Those blue chips that have been bid up on the NYSE have taken on $3 Trillion in debt, partially to buy their own stock and send the price even higher.

When they say $100 Trillion you can be sure its a very restricted sense of ‘debt’.

5. I used to read ZeroHedge and point & laugh at the loony conspiracy theories posted there.

Now it seems like the only place with sane commentary.

That’s very scary to me.

Comment by SPQR (768505) — 3/12/2014 @ 8:43 pm

Captain Capitalism is pretty good, too.

Here he talks about Obama’s MyRA plan. Which is just Obama’s plan to rip off the poor and use their cash as a loan to the government. And my be the camel getting its nose inside of the tent in terms of the feds confiscating all private retirement accounts and converting them to government accounts. You know, a “better” government plan just like your Obamacare is better than your old private plan.

I wasn’t kidding when I said “let the asset confiscation begin!” It’s been done in places like Europe and Argentina. And now they’re going after savings. And don’t tell me the socialists in Pyongyang on the Potomac aren’t thinking of it.

I’m serious. Let’s say you’re King of America and 100 million of your subjects have mortgages on their home that they will never pay off. You also have a 1,000 investors that own those mortgages. Why not forgive all the mortgages and tell the investors they’ll have to settle for a Mercedes instead of a Rolls this year? Leave the savings, investments, and tangible assets of the little people alone. What’s the worst thing that will happen? Fewer people will be able to start up new businesses on debt — they’ll actually have to raise capital. Anything more?

Remember how Barack Hussein Obama and Nobel laureate Paul Krugman and all of he Keynesians told us that the way out of our economic doldrums was to borrow and spend, spend, spend? The world has added thirty trillion in stimulus in the last five years — and the GDP for the entire world is only $85 trillion per year, so that’s the equivalent of a 7% stimulus, over the whole world, every year for those 5 years — so, if the Keynesians are correct, everything ought to be humming along, right?

It would if the borrowed money were spent on things that create wealth instead of things that vacuum wealth into the pockets of the already rich. If your home equity loans goes to expand your store floor space and product line, instead of to a sea cruise and a new car.

Hardly: even money that goes into the pockets of the wealthy gets spent; they don’t just stuff it into their mattresses. If they do something as simple as put into a savings account, it’s still moving the money around, still increasing the velocity of money.

Oh, yeah? So why is there debt, then? They make the pot overflow and what spills out or sticks to their ladle goes into their plate. But it’s not them. It’s the idiots who spend $5.00 for a penny’s worth of polluted water at Starbucks or $7.00 for a 50-cent beer at an NFL game. Or the idiot taxpayers at San Jose who voted to keep on paying their municipal employees almost their full salaries after they retire.

Anyway, I have no right to talk. I agonized over a $135.00 winter coat and tonight my daughter and her mother will spend $300.00 on an Imagine Dragons concert (if they take it easy at the souvenir and concession stands).

25. …What’s the worst thing that will happen? Fewer people will be able to start up new businesses on debt — they’ll actually have to raise capital. Anything more?

Comment by nk (dbc370) — 3/13/2014 @ 5:09 am

Yes. They’ll never get the capital. You’ve screwed over the sources of capital and you can only do that once. There is no distinction between going into business “on debt” and “raising capital.” Both phrases mean the same thing. But now that you’ve demonstrated that as King of America you’ll sieze capital or the property that secures it on a whim, let alone the possibility of ever seeing a return, you’ve rendered all US investment and indeed all US property worthless.

well nk, you didn’t spend the money.
My daughter realizes that we can’t make a concert ticket $100+ a priority in the budget, even if others can.
Hopefully she is content with that instead of harboring a grudge.

But I do agree with the question, though I suspect the answer is bad, as I don’t understand finance that much and the way things are leveraged. I think that if all of a sudden a bank forgave all of its loans, then it would no longer have anything to lend, and business would not only not be able to expand but they may fail like a plague over cash flow.

That Solomon guy knew some things, like don’t go into debt* or you’ll be a slave, even if he learned some of it the hard way.

*I’m assuming this to be debt that has no collateral behind it. I am in debt to a corporation for my mortgage, but I could sell the house, pay off the debt, and have money left over, so I do have the freedom to do that.

I think that if all of a sudden a bank forgave all of its loans, then it would no longer have anything to lend, and business would not only not be able to expand but they may fail like a plague over cash flow.

It would be a disaster of amazing proportions.

Money is created when commercial banks lend money. If Patterico has $1,000 deposited in the Bank of America, and nk borrows $400, then nk has $400 but our esteemed host still has his $1,000, and now $1,400 exists. Banks have to meet reserve requirements — hold a certain percentage of their demand deposits in cash on hand — but that percentage is less than 100, and the part not required to be held is available for loans.

nk is expected to repay the loan, with money he makes in the future, so that the bank will have that $1,000 when Patterico wants it. The bank makes its money on the difference between the interest nk pays and the interest the bank pays our host on his money. It’s a bit more complicated than that, but that’s the Econ 101 version of the explanation.

If the bank forgives nk’s loan, then nk has the $400, but all of a sudden there’s only $600 left of our host’s deposit. The problem is more than just banks no longer having money to lend; the problem is that existing depositers will lose money.

I am in debt to a corporation for my mortgage, but I could sell the house, pay off the debt, and have money left over, so I do have the freedom to do that.

In theory, and it was the failure of the theory in practice which led to the 2008 crash. People expected that their wages would increase and that too-high mortgage payments today would be manageable a few years down the road, and the continued appreciation in value of their homes would leave them with a profit if they did sell.

Then everything crashed, people couldn’t make their mortgage payments, but the banks could not sell the properties for the outstanding loan balances. I happen to know, personally, of several properties on which the banks/mortgage companies should have foreclosed years ago, which are still sitting there, empty and deteriorating, because the banks know that they can’t sell the properties for anywhere close to the outstanding balances. I tried to put in an offer on one, but Sovran Bank won’t even talk to me, because the home is not in foreclosure, even though the owners have disappeared and no payment has been made since November of 2011. (Sovran had to make a property tax payment last year, because there was a sheriff’s sale notice on the house.)

Of course, I offered about half of what I thought the house was actually worth, and that’s well under half of what is owed on it.

The banks don’t know how to deal with this backlog of unoccupied properties, and would rather have to deal with non-performing assets than actual losses on their books.

Let’s say that that loan is made, and you then deposit that $400 in Bank of America, from which you borrowed it. Patterico has a balance of $1,000, and you now have a balance of $400. Total $1,400, where only $1,000 had existed previously.

So, the world is not in debt by a 100 trillion, it is richer by 100 trillion? Or is that only as long as Jupiter doesn’t foreclose?

Actually, that’s not too far off. Loans are based on reserve requirements, and that $100 trillion is, in effect, money advanced from he future. If Jupiter doesn’t foreclose, which it cannot as long as the loans are being repaid on schedule, then the debts are being discharged normally, while the world got a $100 trillion advance.

And I’ll admit: the whole creation of money idea does sound screwy, and just not common sense. It took me a bit of time to get my head around that actually simple concept in Econ 161 (that was how UK numbered the course in the early 1970s), but once I did, the rest fell right into place.

Dana, the moneylender theory of economics is a fantasy. Wealth is created from raw material and labor. Period. Not from increasing the “velocity” of the money we throw around. That only creates debt. From the fingers it sticks to in its travels.

Painted Jaguar (puzzled expression on visage, thoughtlessly scratching his head with R paw):
If my mummy, ever so patient and kind, deposited part of a dead Anaconda in a place for safe keeping, upon returning to this safe place and finding only 1/2 of the Anaconda meat there, would very likely no longer be very patient and kind, but would demand with the loudest roar to know where the other half of the Anaconda meat was.
I am glad my mummy is ever so patient and kind with me, because it is frightening to be around her even when she is angry with someone else.
Hmmm. So, any given day, any given bank would go bankrupt if there was a “run” on it. To minimize the risk of this, the FDIC guarantees your money will be there (up to certain limits) when you want it, so you don’t have to be in a hurry to get yours before everybody else gets theirs.
So, this is why the stock market goes up when there is no reason too, other than the government making up money to say the stocks are worth more than they are worth.
So “wealth” and money” are two different things, apparently. The things I have (being few as we jaguars don’t have pockets) I have, no matter how much money there is in the world.
I would say that MD never tells me anything, but in this case he already said he doesn’t know much about such matters, so I can’t blame him for not telling me what he doesn’t know,
now can I?

One thing I do know, though. nk is probably wondering where to pick up his check for $400.

But that’s wonderful, and I don’t understand what Patterico is complaining about. We got $100 trillion for nothing.

Look at it this way: the Fed has been playing this game all along with “quantitative easing.” If the government writes you a check for $1,000, but doesn’t actually have $1,000 in the Treasury, when you cash that check, you still have that $1,000 as long as the Treasury doesn’t bounce the check! Since the Treasury is it’s own watchdog, if it doesn’t bounce the check, then, in theory, the difference between the $1,000 of that check and what was actually in the bank is created money.

In theory, we could pay no taxes at all, and borrow no money, and the government could keep spending, because there’s no one in a position of authority to bounce the checks. As long as the recipients keep accepting the checks, it’s all good money. The problem comes where reality meets real life, and where real people don’t accept the checks if the government goes overboard on that kind of stuff. That’s why quantitative easing has actually been so limited, as the Fed tries to walk the tightrope of creating money that way without triggering an inflationary response which would cause creditors to stop accepting the checks as good.

We can get away with this, because our debts are denominated in our own currency. The greatest tragedy would be for the rest of the world to say, “Fornicate you,” and start demanding repayment in euros. At that point, it would all fall apart.

Dana, the moneylender theory of economics is a fantasy. Wealth is created from raw material and labor. Period. Not from increasing the “velocity” of the money we throw around. That only creates debt. From the fingers it sticks to in its travels.

Except, of course, that the theory still works.

Money is really nothing in itself. It’s simply a medium of exchange, to transfer value of production from one person to another. As long as the payee accepts the money as a fair medium of exchange, it works.

MD told me that he figured many of these empty houses, at least in Philly, get vandalized and the copper is taken out and sold and all kinds of nasty things happen, making the lose on the property even greater than it already was. MD said he thought someone should be able to buy the house at a loss for the bank, but not as much of a loss as there will be if it sits there and is vandalized, and the person who bought the house and maintained it could make some money on selling or renting it to somebody at a lower price than they could before.
Everybody would “win” as it were, the bank could minimize their loss, somebody would make some money, and someone else would be in an affordable home.
But MD said he didn’t really know how to do it himself or have the money to make it happen.
It sounds like the Dana from the school tha MD’s daddy cheers for tried to do it, but the bank wouldn’t play,
probably because the feds got in and messed things up trying to fix the mess they made in the first place.

Meanwhile, from that same website is the following story about a peculiar plan taking place seemingly in the stealth of the night. Very hinky things going on out there, in this era of the United States of Banana-Republic America.

zerohedge.com, March 12: WTI crude prices are faling rapidly as Reuters reports that the US is set to ‘unleash’ its Strategic Petroelum Reserves in a “test-sale”…

*U.S. TO RELEASE CRUDE FROM STRATEGIC PETROLEUM RESERVE: REUTERS

Of course, this is a direct aim at Putin’s pocket-book as his stumbling economy needs high prices to sustain itself. However, the 5 million barrell release is less than a third of the US daily consumption rate (though does sound some alarms we are sure).

Via Bloomberg,

U.S. to release up to 5 million bbls of crude from Strategic Petroleum Reserve (SPR), Reuters reports, citing govt “source.” SPR to be test sale, check operational capabilities of system infrastructure; timing unclear.

By way of reference, this 5 million barrel release compares to average US consumption of around 18 million barrels per day.

This can be a frustrating process. The key is to find the individual asset manager at the bank that has that specific property in their portfolio. Even then, it will be difficult.

Even then, it’s a problem. The bank would have to start the foreclosure proceedings, and those take months and lots of legal fees. It would be an absolute minimum of 120 days, and could be longer, depending on the state.

PJ: as much as I’d like to blame this on the feds, the real problem is the banks. They don’t know how to handle these problems, because they have occurred in unprecedented numbers. In addition, they want to space out their losses, for bookkeeping purposes; if they took too many of these losses at once, they’d go bankrupt.

Money is really nothing in itself. It’s simply a medium of exchange, to transfer value of production from one person to another. As long as the payee accepts the money as a fair medium of exchange, it works.
Comment by The Dana still running out of fresh adjectives (3e4784) — 3/13/2014 @ 7:57 am

See, this is the confusing part (I sent PJ out to play).
Once upon a time I read and thought that people traded things, like 3 chickens for a young goat, but that since it is hard to carry around goats and chickens in your pockets, money was created to serve as an intermediary of exchange. That “X” amount of money was the equivalent in trade as 1 chicken. I’m guessing this was true as long as we had a gold standard, or when the bank issues silver certificates (“this piece of paper is good for exchange for $1 worth of silver at the treasury”).
And when we went off of the gold standard, this link between money and something tangible was severed, hence banks can pretend they have more money than stuff by their bookkeeping, as long as everyone is willing to take turns getting their share…
Wait a minute,
this sounds like the whole economy is nothing but one big Ponzi scheme…

Dana the adjectivized, what say you about that, and what does it look like for UK this year, I haven’t been following, and my dad’s ability to think and communicate has been hampered a bit by too many strokes.

To complete my circle of thinking, money has become something in its own right, so to speak, because banks and borrowers and governments and investors all act as if it is something in the abstract, whether there is anything to back it up or not.

Hmm, playing pretend that works as long as everyone keeps pretending…
this does not sound like it ends well.

MoneylendingCapitalism works if the lent money capital is used for a productive purpose. And economic theories work if they have “if” in them.

nk, Painted Jaguar, and an economist are stuck on a desert island with a can of beef stew and no can opener. Painted Jaguar says, “I’ll climb to the top of that palm tree and drop the can on that rock underneath so it will burst open, like I do with armadillos”. nk says, “No need. I can wear away the crimp around the lid (it’s pretty soft metal) by rubbing it on that rock and we’ll just lift the lid off”. The economist says, “If we had a can opener ….” [and it's then that Painted Jaguar eats him].

Painted Jaguar (chuckling a heart jaguarian chuckle): That’s a funny one, nk. I would wait and eat you the very last…

Mr. JD-
If you have had success at this, why have we not seen an infomercial telling us you will tell us how to do it (for “free”)?
Seriously, it seems you have been able to do what some of us just think of. Are you just gifted at it, or do you have the right combination of factors where you are?

To complete my circle of thinking, money has become something in its own right, so to speak, because banks and borrowers and governments and investors all act as if it is something in the abstract, whether there is anything to back it up or not.

Hmm, playing pretend that works as long as everyone keeps pretending…
this does not sound like it ends well.

King Midas might be able to tell you about whether there is anything backing up money which makes it worth anything. Even gold has no value beyond what people are willing to give you for it.

Money works because people believe that it works. I produce ready-mixed concrete for a living, and it’s good, high-quality stuff: it’s strong and it’s hard, but it isn’t very tasty. Money as a medium of exchange is what has allowed us to leave a subsistence lifestyle; if we didn’t already have it, we’d have to invent it.

I can see an argument why a particular currency or banking system might fail, because people lose faith in it, but overall, we will always have money because we will always need money.

The percentage who voluntarily left their job—the nation’s “quit rate”—hit 1.8% in November, the highest in the recovery and up from a low of 1.2% in September 2009, according to the Labor Department. About 2.4 million workers resigned in November. Some retired or simply chose not to work. But most quit to hunt for a new job or because they had already found one.

Figures for December, due Tuesday, will probably show further gains in quitting, economists say.

Economists, including new Federal Reserve Chairwoman Janet Yellen, consider the willingness of workers to jump ship a sign of the labor market’s health. When times are good, people quit more because they are more optimistic about their prospects. And often when a worker quits, it creates an opportunity for someone else—a new graduate, say, or a person who lost their job—to find work.

MD – I have no particular skill set, other than a willingness to be persistent to the point that you wear the asset manager out. There are probably 20 different points where the process can break down. Once you accept the fact that you have no direct control, and are willing to be patient, pushing the process while not controlling it, it really isnt that bad. Each one played out a little differently due to differing internal processes at different banks, The one constant is finding the individual asset manager or whatever title they may have. Without that, it gets stuck where nobody is personally invested in it. I will say that we probably could have held out and paid even less on each, but paid a little more to get their attention, and to keep the properties from going all the way to market post-foreclosure. They can short sale with the right incentives.

Mr Jaguar, I’m bigger, stronger and faster than nk, so you’ll wind up eating him first, because he’d be easier to catch. Then, while you are busy chowing down on a very stringy barrister, I’ll brain you with a rock, and have all of the food to myself.

Then, when I’m rescued 27 days later, I’ll get thrown in jail for killing an endangered species.

And the reason our dollar will fail is because we’ve been supplying the world with $500 Billion in money flow for decades that can no longer be supported.

Well, maybe not. The deficit is down — though still way too high — and that means borrowing less from overseas. And, thanks to hydraulic fracturing technology, we are once again the world’s largest oil and gas producers, and should achieve energy independence in less than ten years. (We are already a net exporter of fuel.) If we can stop sending the fruits of our production to Venezuela and Saudi Arabia (actually, Canada is our largest supplier!) we might get to the point where we aren’t sending our energy dollars overseas, things could get a lot better.

That assumes, of course, that our current environmentalist whacko president isn’t succeeded by another environmentalist whacko.

The one constant is finding the individual asset manager or whatever title they may have. Without that, it gets stuck where nobody is personally invested in it.
Comment by JD (eea907) — 3/13/2014 @ 8:58 am

That is the key to almost anything, I guess. Until someone takes the responsibility to get something done, no_one does it.
Some people rise to the top by getting things done, some rise to the top by finding a way to get others to get it done for them, sometimes cooperatively as a team and sharing the credit, but too often through coercion to get themselves ahead.

On the topic of money, I do realize that in a sense even gold has no intrinsic value, only that which people assign it according to its usefulness/desirability; yet it is still a something that has value in and of itself, not like a piece of paper in and of itself good for burning or toilet paper.
I guess I’m thinking there is a fundamental difference between a commodities market and what banking and the stock market has become. In the commodities market, as I would understand it, money is simply an easier to carry symbol for actual things that one can hold in one’s hand, the chicken and goat scenario. Perhaps at one time banking and the stock market were more like the commodities market, the price of a stock was more tied to the actual worth of a company in terms of its productivity, earnings, etc., and a bank’s worth was tied to the collateral it could liquify to cover deposits.
But somewhere along the way, money itself started having “a life of its own” in the banking industry and the stock market.

Is that sort of true?

Comment by The wary economist Dana (3e4784) — 3/13/2014 @ 8:58 am
Umm, if I were you I would be very slow to make or even imply threats against PJ, he has a very devoted mummy you know. PJ doesn’t dare to cross her, how much less should a Kentucky Wildcat (remember, jaguars do climb trees).

That assumes, of course, that our current environmentalist whacko president isn’t succeeded by another environmentalist whacko.
Comment by The optimistic Dana (3e4784) — 3/13/2014 @ 9:20 am

On that alone, it is incredible that in spite of all of the mess we are in, we still have the capability within our borders to prosper and give leverage to justice in the world, freeing Europe from manipulation for Russia, etc., etc.
Yet at the same time, with so little confidence (rightly deserved) in a corrupt culture and government, it seems we are virtually destined to squander every little bit of hope and opportunity we have.

Federal Reserve Notes, aka U.S. Dollars, will absolutely go the way of the dinosaurs with a decade or so.

Something will replace them, though. it will all be in whose oxen being gored as to the fallout.

We have what nobody else has: Food and water. We also have abundant carbon energy. THESE are tangible and necessary to life itself. It’s a matter of shifting value to these assets against the long-held wealth in Europe. europe has a problem? Let ‘em eat banknotes.

This is really where things are gonna break, my friends. The USA will hold he best cards. Of course, it’s an open question as to how well these are played.

And, thanks to hydraulic fracturing technology, we are once again the world’s largest oil and gas producers, and should achieve energy independence in less than ten years.

Whodda thunk that, not all that many years ago?!

Unlike assumptions or predictions about worldwide famine, or global warming causing this horror or that horror, or claims regarding global cooling decades ago, estimates within the past few decades about the US becoming increasingly (and ominously) dependent on foreign sources for oil seemed like a given, like a fairly logical equation. But never underestimate the resourcefulness and cleverness of people and their technology.

That’s why I hesitate to be too confident in my own assumptions — one way or the other — about what lies ahead, at least when it comes to what the economy will be like X number of months or years from today.

76. I’m afraid the time frame envisioned by your solutions is not credible.

(Sorry I was laboring during the interim between your post an this and more mayhem in the markets.)

The Fed is caught in a liquidity squeeze that has already begun its end game. I do not know what has become of their repurchase agreement experiments of 6 months ago but they must continue taper or totally destroy the bond market.

The direct result is that emerging markets do not have currency with which to pay their debts. The world’s debts are ten times collateral.